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Thursday, March 28, 2024

Cannabis sales uptick not enough

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Canadian cannabis sales soared at the start of the coronavirus pandemic, but not enough to bolster a sector in the throes of reorganization only two years after the drug was legalized.

Fearing a shortage of the dried flower, Canadians rushed to cannabis stores and websites to stock up ahead of what would turn out to be a three-month government-ordered lockdown to slow the spread of COVID-19.

Sales jumped almost 20 percent in March from the previous month and continued at a brisk pace through April, according to the government statistical agency.

Classified as an essential service, pot stores remained open while online sales exploded.

Industry expert Bradley Poulos, who teaches at Ryerson University in Toronto, said the pandemic has had a positive effect in that the legal market has actually seen an uptick in business.

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"We saw a transfer of some of the illegal (black market) business over to the legal market during this time," he told AFP.

But, he added, that hasn't been enough of a boost for an industry in trouble and still struggling to reach profitability. 

Canada was the second nation, after Uruguay in 2013, to legalize the recreational use of cannabis.

Canadian firms—including Canopy Growth, Aurora and Tilray—quickly established themselves as industry leaders, expanding into foreign markets in anticipation of legalization spreading, for recreational or medical use.

They raised billions of dollars from investors, listing on the Toronto and New York stock markets.

But the buzz quickly faded.

In March, Canopy Growth announced the closure of two greenhouses and laid off 500 workers.

On Tuesday Aurora became the latest to scale down, closing five greenhouses and letting go 700 staff.

Rishi Malkani, head of Deloitte Canada's cannabis practice, said cannabis firms are facing dire liquidity problems.

About 10 companies on the verge of failing have filed for bankruptcy protection since the start of the year, and more are expected to follow in the coming months, he predicted. 

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